So Obama Sees the Romer Memo, Then What?

February 22, 2012

Jon Chait asks the key question in response to the internal administration memo I uncovered while researching my book--the one in which Christy Romer wrote that it would take $1.7-to-$1.8 trillion to fully revive the economy by 2011. Chait writes:

It’s important to keep in mind, though, that this still does not resolve the question of whether or not Obama could have gotten a larger stimulus. ...

[T]he ultimate decision-making power here was where it always was: with Ben Nelson, Olympia Snowe, and Arlen Specter, the senators who stood at the decision-making point. It’s clearly those senators who were exerting the direct pressure to limit the cost of the stimulus, and the administration, including Summers, was responding to them.

The counterfactual is what would have happened if Obama had proposed a much larger stimulus to begin with. His political team believed it would have risked delaying the bill or caused it to collapse entirely. Perhaps. It’s also possible it would have simply shifted the frame of the debate, so that “large” was now defined by $1.8 trillion rather than $800 billion, and the “centrist” position would settle in at, say, a trillion and a half or thereabouts.

I think that's about right. As I say in my piece today, even if Obama knew the economy needed a $1.8 trillion stimulus, that doesn't mean he was going to be able to pass one. But a figure like $1.8 trillion might have focused the mind a bit more and persuaded him to re-calibrate upward. And not just for his initial stimulus proposal, but over the course of the next three years. Had Obama grasped that he was $1 trillion off the mark (and, as it happened, much more, since the economy turned out to be in even worse shape than Romer realized when she wrote this memo), I suspect he would have put a higher priority on stimulus throughout his first term.